Discover 2015 Annual Report Download - page 26

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Certificates of deposit are offered on a full range of tenors from three months through ten years with interest rates
that are fixed for the full period. We provide automatic renewal along with options on reinvestment or disbursement of
interest. There are minimum balance requirements to open certificates of deposit and penalties for early withdrawals.
Money market accounts are transactional accounts with minimum balance requirements. Money market account funds
may be accessed through electronic funds transfer, checks, wire transfer and debit cards. Savings accounts may be
accessed through electronic funds transfer, wire transfer and official checks. Money market accounts and savings
accounts have limitations on withdrawal frequency, as required by law. Interest rates on money market accounts and
savings accounts are subject to change at any time. Fees apply to some transactions and availability of funds varies
based on product and method of funding.
We also issue certificates of deposit through select contracted brokerage firms. All of these deposits are also FDIC
insured to the maximum allowed by law. All settlements occur through the Depository Trust Company. Tenors issued,
interest and commission rates are determined weekly with tenor issuances of five months to ten years. Simple interest is
applied to brokered certificates of deposit. At any given time, we may choose to not issue these certificates of deposit or
to issue only certain tenors in a given week. Early redemption of these certificates occurs only in the event of death or
adjudication of incompetence.
Discover Network Operations
We support our merchants through a merchant acquiring model that includes direct relationships with large
merchants in the United States and arrangements with merchant acquirers for small- and mid-size merchants. In
addition to our U.S.-based merchant acceptance locations, Discover Network cards also are accepted at many
locations in Canada, Mexico, the Caribbean, China, Japan and a growing number of countries around the world on
the Diners Club network, or through reciprocal acceptance arrangements made with international payment networks
(i.e., network-to-network).
We maintain direct relationships with most of our large merchant accounts, which enables us to benefit from joint
marketing programs and opportunities and to retain the entire discount revenue from the merchants. The terms of our
direct merchant relationships are governed by merchant services agreements. These agreements are also accompanied
by additional program documents that further define our network functionality and requirements, including operating
regulations, technical specifications and dispute rules. To enable ongoing improvements in our network's functionality
and in accordance with industry convention, we publish updates to our program documents on a semi-annual basis.
Discover card transaction volume was concentrated among our top 100 merchants in the year ended December 31,
2015 with our largest merchant accounting for approximately 7% of total Discover card transaction volume.
In order to increase merchant acceptance, Discover Network services the majority of its small- and mid-size
merchant portfolios through third-party merchant acquirers to allow such acquirers to offer a comprehensive payments
processing package to such merchants. Merchants also can apply to our merchant acquirer partners directly to accept
Discover Network cards through the acquirers' integrated payments solutions. Merchant acquirers provide merchants
with consolidated servicing for Discover, Visa and MasterCard transactions, resulting in streamlined statements and
customer service for merchants, and reduced costs for us. These acquirer partners also perform credit evaluations and
screen applications against unacceptable business types and the Office of Foreign Asset Control Specifically Designated
Nationals list.
Discover Network operates systems and processes that seek to ensure data integrity, prevent fraud and ensure
compliance with our operating regulations. Our systems evaluate incoming transaction activity to identify abnormalities
that require investigation and fraud mitigation. Designated Discover Network personnel are responsible for validating
compliance with our operating regulations and law, including enforcing our data security standards and prohibitions
against illegal or otherwise unacceptable activities. Discover Network is a founding and current member of the Payment
Card Industry Security Standards Council, LLC, and is working to expand the adoption of the Council's security
standards globally for merchants and service providers that store, transmit or process cardholder data.
Technology
We provide technology systems processing through a combination of owned and hosted data centers and the use
of third-party vendors. These data centers support our payment networks, provide customers with access to their
accounts and manage transaction authorizations, among other functions. Discover Network works with a number of
vendors to maintain our connectivity in support of POS authorizations. This connectivity also enables merchants to
receive timely payment for their Discover Network card transactions.